Commissioner Of Income-Tax, Faridabad v. M/S Om Parkash And Sons

Income-tax Appeal No.147 of 2010 **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.147Date of decision: 14.2.2011 of 2010 Commissioner of Income-Tax, Faridabad ...Appellant Versus M/s Om Parkash and sons ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms. Urvashi Dhugga, Sr. Standing Counsel for the appellant. Mr. S.K.Mukhi, Advocate with Ms. Jyoti, Advocate for the respondent. **** ADARSH KUMAR GOEL, J ( Oral) . 1.This order will dispose of Income Tax Appeals No.147and 158 of 2010 as both relate to same assessee and questionsraised are inter-connected. 2.ITA No.147 of 2010 has been preferred by the revenueunder Section 260A of the Income Tax Act, 1961 (for short “the Act”)against the order dated 25.5.2009 of the Income Tax AppellateTribunal, Delhi Bench 'F', Delhi in I.T.A. No.3550/Del/08 for theassessment year 2000-01 raising following substantial questions oflaw:- “i)Whether on the facts and in the circumstances ofthe case, the findings recorded by the ld. ITAT areperverse and contrary to the evidence available onrecord as the assessee had failed to discharge the onus to prove the genuineness of transactions ofsale of shares shown by him? ii)Whether, on the facts and in the circumstances ofthe case, the findings recorded by the ld. CIT(A) asconfirmed by the ld. ITAT are perverse in so far asthe assessee was required to furnish evidence ofgenuineness of sale transactions of shares such asevidence regarding genuineness of rate and saletransactions, market quotations, comparable marketrates and evidence but the assessee had notfurnished any such evidence except copies ofcontract notices of brokers?” 3.ITA No.158 of 2010 has been preferred by the revenueagainst the order dated 25.5.2009 of the Income Tax AppellateTribunal, Delhi Bench 'F', Delhi in I.T.A. No.92/Del/08 for the blockperiod 1.4.1990 to 3.8.2000 raising following substantial questions oflaw:- i)Whether on the facts and in the circumstances ofthe case, the findings recorded by the ld. ITAT areperverse and contrary to the evidence available onrecord in so far as the Assessing Officer hadinitiated the proceedings u/s 158BD of the IncomeTax Act, 1961 after recording requisite satisfaction(Annexure-A) for the purpose of initiatingproceedings u/s 158BD of the Income Tax Act, 1961 in the case of the assessee? ii)Whether on the facts and in the circumstances ofthe case, the ld. ITAT was right in law in holding thatthe notice u/s 158BD of the Income Tax Act, 1961 isbad in law and the order is liable to be annulled asthe notice u/s 158BD in the case of the assesseehas been issued much after the completion of theassessment in the case of Manoj Aggarwal or M/sFriends Portfolio (P) Ltd., being the person throughwhom the assessee has dealt purchase and sale ofshares?” 4.Re-assessment proceedings were initiated against theassessee on account of information received during blockassessment of M/s Friends Portfolio (P) Ltd. on whom searchoperation had been conducted on 3.8.2000. From the material foundduring the search, it was noticed that Manoj Aggarwal was thecontroller of M/s Friends Portfolio (P) Ltd. who was engaged in givingbogus accommodation entries through net-work of mediatorsspread all over India. It was found that the assessee had receivedaccommodation entries in the form of a cheque for Rs.16 lacs in lieu ofcash paid to Manoj Aggarwal. In addition thereto, the assessee had shownreceipt of consideration for sale of shares through M/s Aggarwal StockBroker and M/s JRD Stock Brokers in respect of sale of shares of M/sB.S.Holdings & Credit (P) Ltd. The said receipt was claimed to be income from long term capital gain which was invested in construction ofhouse and declared to be exempt under Section 54F and someamount was declared to have been deposited in ICICI bonds andwas claimed to be exempt under Section 54EA. By way ofreassessment additions of Rs.13,82,375/- was made to the declaredincome as income from undisclosed sources on substantive basiswith the following findings:- “During the course of instant proceedings also, theassessee was required to furnish evidences ofgenuineness of sale transaction of shares but theassessee has not furnished any such evidence. Onlycopies of contract notes of brokers have been filed. Theassessee has failed to furnish any other independenceevidence regarding genuineness of rate and saletransactions, market quotations, comparable market ratesand evidences etc. From the facts of law case, it isevident that the transactions of sale of shares shown bythe assessee are not genuine and that the assessee hasintroduced his own money in the name and styles ofshares. Therefore, after considering all the facts andfigures of the case, it is held that alleged sale proceedingof shares i.e. Rs.29,44,120/- is chargeable to tax as'income of assessee' from undisclosed sources and theassessee is not entitled for any exemption or deductionu/s 54 of the Income Tax Act in respect of these receipts. Out of Rs.29,44,120/- an amount of Rs.15,61,745/- hasalready been charged to tax as undisclosed income ofthe assessee for block period. The remaining receipts ofRs.13,82,375/- is assessed to tax as income of theassessee from undisclosed sources for the year underconsideration on substantive basis.” 5.In block assessment proceedings, addition ofRs.15,61,745/-, was made on the ground that the same wasundisclosed income of the assessee for the block period 1.4.1990 to3.8.2000 shown as sale proceeds of shares through M/s FriendsPortfolio (P) Ltd. and was part of total amount of Rs.29,44,120/-which was the alleged sale proceeding of the shares. Relevantfinding in the assessment order from the block assessment is asunder:- “The assessee has failed to prove the genuineness of theshare transactions shown to have been entered intoduring the block period. The assessee has shownreceipts of sale proceeds of shares amounting toRs.29,44,120/- during the block period. It is stated that20,000 shares had been sold for consideration ofRs.15,65,000/- through M/s Friends Portfolio (P) Ltd.against which receipt of Rs.15,61,745/- were received.After considering the facts of the case, material on recordand categorical statement of Shri Manoj Aggarwal,Director of M/s Friends Portfolio (P) Ltd., the amount of credit entries in respect of alleged sale proceeds ofshares of M/s B.S.Holdings & Credit Ltd. amounting to toRs.15,61,745/- is assessed to tax as “Income fromundisclosed sources” of the assessee for the block periodand is assessed to tax accordingly. Penalty proceedingsu/s 158BFA(2) are initiated as the assessee was inpossession of undisclosed income which has beendetected as a result of search. credit entries in respect of alleged sale proceeds ofshares of M/s B.S.Holdings & Credit Ltd. amounting to toRs.15,61,745/- is assessed to tax as “Income fromundisclosed sources” of the assessee for the block periodand is assessed to tax accordingly. Penalty proceedingsu/s 158BFA(2) are initiated as the assessee was inpossession of undisclosed income which has beendetected as a result of search. The assessee has shown to have sold other 20,000shares of M/s B.S.Holdings & Credit Ltd. during the blockperiod through other brokers. It is claimed that out of saleproceeds of shares amounting to Rs.29,44,120/-, theamount of Rs.15,61,745/- was received from M/s FriendsPortfolio (P) Ltd. and the remaining amount ofRs.13,82,375/- represented the sale of shares throughother brokers. On examining the facts of the case, it isfound the average rate of share shown to have been soldthrough M/s Friends Portfolio (P) Ltd. comes to Rs.78/-per share approx. Similarly, average rate of shareclaimed to have been sold through other brokers comesto Rs.70/- approximately per share. However, noevidence has been filed to establish the genuineness ofrate and supporting evidences of genuineness of saletransactions of shares as well as ownership of shares.Since the alleged sale receipts of shares amounting to Rs.13,82,375/- are not connected to M/s Friends Portfolio(P) Ltd., Delhi and the block assessment proceedings,these are added to the income of the assessee onprotective basis as income from undisclosed sources forthe block period and separate proceedings u/s 147/148 ofthe I.T. Act, 1961 are to be initiated for assessment ofthese receipts of Rs.13,82,375/- on substantive basis inrespective years. With these remarks, total undisclosed income ofthe assessee for the block period is calculated as below:-1.Unexplained credits (as discussed) Rs.15,61,745/-2.-do- (on protective basis as discussed)Rs.13,82,375/-Total undisclosed income for block period Rs.29,44,120/-”1.Unexplained credits (as discussed) Rs.15,61,745/-2.-do- (on protective basis as discussed)Rs.13,82,375/-Total undisclosed income for block period Rs.29,44,120/-” 6.On appeal arising from order of re-assessment for theyear 2000-2001, the CIT(A) deleted the additions on the ground thatin respect of transactions with M/s JRD Stock Brokers, the assessingofficer had failed to consider any evidence in support of its findingthat transaction was bogus. The assessing officer had only discussedthe modus operandi of Manoj Aggarwal which had relevance for theshares sold through M/s Friends Portfolio (P) Ltd. and not throughany other party. This finding has been affirmed by the Tribunal asunder:- “We have heard the submissions made by the learnedDR and have also perused the order of the learned CIT(A) as also the assessment order. The assessing 6.On appeal arising from order of re-assessment for theyear 2000-2001, the CIT(A) deleted the additions on the ground thatin respect of transactions with M/s JRD Stock Brokers, the assessingofficer had failed to consider any evidence in support of its findingthat transaction was bogus. The assessing officer had only discussedthe modus operandi of Manoj Aggarwal which had relevance for theshares sold through M/s Friends Portfolio (P) Ltd. and not throughany other party. This finding has been affirmed by the Tribunal asunder:- “We have heard the submissions made by the learnedDR and have also perused the order of the learned CIT(A) as also the assessment order. The assessing authority, in the assessment order, has stated that theevidence called for by him had not been produced andeven through the assessing authority wanted to tax thisamount of Rs.13,82,375/- representing the allegedundisclosed income of the assessee out of thetransaction of the purchases and sales of shares notdone with Shri Manoj Aggarwal but through third party,namely, M/s JRD Stock brokers. The AO has primarilydiscussed the modus operandi of Shri Manoj Aggarwal. Itis also noted that the assessing authority has not madeany discussion nor had any evidence in his possession inregard to the transaction with M/s JRD Stock Brokerswhich could even hint that the transaction with M/s JRDStock Brokers was bogus. A perusal of the order oflearned CIT(A) clearly shows that the learned CIT(A) hadverified the assessment records and after verification hasfound that even though the AO had stated that theassessee has not filed any details, the AO in his order-sheet dated 19.11.2007 has admitted the filing of theinformation. It is further noticed that the learned CIT(A)has considered the fact that the assessee had producedthat contract notes of the shares transacted by theassessee and this has also not been shown by the AO tobe file, fabricated or wrong. Thus, it is noticed that thelearned CIT(A) has in the absence of adverse inference about the share transaction relating to the saleconsideration of Rs.13,82,375/- has deleted the addition.Even before us, the learned DR has not been able toproduce any evidence contrary to the finding as recordedby the learned CIT(A). In the circumstances, we are ofthe view that the learned CIT(A) has taken a correct viewand no interference is called for in his order.” 7. We have heard learned counsel for the parties. 8.Learned counsel for the revenue submitted that the CIT(A) as well as the Tribunal have erred in law in deleting the additions.The findings recorded by the CIT(A) as well as the Tribunal areperverse. The burden of proving genuineness of the transactions ofsale of shares through M/s JRD Stock Brokers was on the assessee.Having regard to the fact that the assessee was found having bogustransactions to conceal undisclosed income, the circumstances reliedupon by the assessing officer in respect of bogus transactions justifydrawing of inference against the assessee. The assessee wasrequired to show genuineness of the sale transactions of shares.Even though reasons for which the transactions through M/s FriendsPortfolio (P) Ltd. were held to be bogus may not strictly apply totransactions through M/s JRD Stock Brokers, legal issue remains thesame i.e. whether the transactions of the assessee were genuine.Reference has been made to following discussion in the order of theassessing officer:- “Statement of Sh. O.P.Bhalla, Karta was also recordedduring block assessment proceedings. The salient feature of this statement and of the caseare as under:- a)The assessee did not have any prior knowledge ofshare transactions. b)The assessee had not done any dealing in sharesof any company, in past as well as in futures. As per thestatement of Shri O.P.BHalla, the HUF had donepurchase/sale transactions in shares of M/s B.S.Holdings& Credit Ltd only which assessee has shown to havebeen entered in. “Statement of Sh. O.P.Bhalla, Karta was also recordedduring block assessment proceedings. The salient feature of this statement and of the caseare as under:- a)The assessee did not have any prior knowledge ofshare transactions. b)The assessee had not done any dealing in sharesof any company, in past as well as in futures. As per thestatement of Shri O.P.BHalla, the HUF had donepurchase/sale transactions in shares of M/s B.S.Holdings& Credit Ltd only which assessee has shown to havebeen entered in. c)The assessee had no knowledge or background ofthe company, shares of which have been claimed astraded. d)The assessee did not have any knowledgeregarding rates of shares of the said company at anypoint of time. e)The assessee did not have any knowledge of thebrokers through him purchase and sales of shares hasbeen shown. f)The assessee has shown sale of shares worthRs.29,44,120/- but the copies of contract notes andevidences of genuineness of transactions have not beenfiled. g)Evidences of ownership of shares, transfer anddelivery of shares have not been filed. h)Names and addresses of the persons whom sharespurchased and to whom shares were sold have not beenfurnished. i)Evidence of payment of purchase consideration ofshares have also not been filed. j)The sources of various credit entries in the bankaccount and genuineness of sale consideration of sharesremains unexplained. k)The facts of the case establish that no actualtransaction of shares was done by the assessee but onlythe purchase and sale bills of accommodation entrieswere taken as per convenience to justify the transactionsentered into bank accounts of the assessee. Thus, it was proved that the assessee had not doneany actual transaction of sale of shares”. 9.Though the above discussion in the order of theassessment was in the context of transactions of shares through M/sFriends Portfolio (P) Ltd., the same was fully applicable to any othertransaction of the assessee and it was for the assessee todistinguish its applicability to the other transactions. The assesseewas called upon to furnish material in support of genuineness of thetransactions but it failed to do so. 10.Learned counsel for the assessee has not been able to show any material which may have been furnished by it to justifygenuineness of the transactions and merely submitted that it was forthe revenue to lead evidence to show that the transactions were notgenuine as held by the CIT(A) as well as the Tribunal. This pleacannot be accepted as the circumstances relied upon in the order ofthe assessing officer placed the burden on the assessee to explainthe genuineness of the transactions. Thus, the questions raised onbehalf of the revenue have to be answered in its favour and againstthe assessee. Though in view of this finding the matter could havebeen decided against the assessee, with a view to give furtheropportunity to the assessee, we set aside the impugned orders andremand the matter to the CIT(A) for fresh decision in accordance withlaw. The assessee may appear before the CIT(A) for furtherproceedings on 25.4.2011. 11.Coming to ITA NO.158 of 2010, finding recorded by theassessing officer has already been reproduced above to the effectthat transaction through M/s Friends Portfolio (P) Ltd. were bogus.The CIT(A) set aside the additions only on the ground that therequisite satisfaction under Section 158BD has not been recordedduring the block assessment of the searched person. Findingrecorded by the CIT(A) is as under:- “12. Keeping in view the above ratio of the Apex Courtand the ld. Jurisdictional Tribunal and the ChandigarhBench Tribunal, therefore, in this case the searchoperations were conducted on 3.8.2000 at the residential 11.Coming to ITA NO.158 of 2010, finding recorded by theassessing officer has already been reproduced above to the effectthat transaction through M/s Friends Portfolio (P) Ltd. were bogus.The CIT(A) set aside the additions only on the ground that therequisite satisfaction under Section 158BD has not been recordedduring the block assessment of the searched person. Findingrecorded by the CIT(A) is as under:- “12. Keeping in view the above ratio of the Apex Courtand the ld. Jurisdictional Tribunal and the ChandigarhBench Tribunal, therefore, in this case the searchoperations were conducted on 3.8.2000 at the residential and office premises of Sh. Manoj Aggarwal and hisassociate concerns, here M/s M/s Friends Portfolio (P)Ltd. and the block assessment of M/s Friends Portfolio(P) Ltd. was framed u/s 158BC of the I.T.Act on29.8.2002 by the DCIT, Central Circle-3, New Delhi. Asper the assessment order of the AO u/s 158BD of the Act,the reasons for proceedings u/s 158BD were recorded on29.3.2004. From these very facts, it is quite crystal clearthat the mandatory satisfaction as per the provisions ofsection 158BD was not properly and validly recorded, asit was not recorded during the course of assessmentproceedings of Sh. Manoj Aggarwal of M/s FriendsPortfolio (P) Ltd. and the proceedings were initiatedagainst the appellant u/s 158BD on 29.3.2004 by the AO,Faridabad after getting the intimation for necessary actionin the concerned case from the DCIT, Central Circle-3,New Delhi. As per the law laid down by the Apex Courtas above, the two conditions have not been met by thepresent AO in his order u/s 158BD as is evident from itscontents i.e. (i) the satisfaction has not been recorded bythe AO having jurisdiction over the searched person (hereSh. Manoj Aggarwal of M/s Friends Portfolio (P) Ltd.) thatundisclosed income belonged to any other person (herethe appellant, Sh.O.P.Bhalla, HUF) than the searchedperson i.e. Sh. Manoj Aggarwal; (ii) hand over the books of account and other documents and assets seized by theAO having jurisdiction against the other person. 13.The second condition is also not satisfied in thepresent case as no books of account seized or otherdocuments seems to have been the basis of addition inthe case of the appellant except the statement of Sh.Manoj Aggarwal. Had it been there any seized materialwith the present AO u/s 158BD, he could have confrontedit with the appellant during the course of assessmentproceedings u/s 150BD or had recorded satisfaction evenafter the order u/s 158BC had been passed, which is notthe position as is clear from the reasons recorded on23.9.2004. The proceedings u/s 158BD were initiatedonly on some sketchy information supplied by the AOhaving assessed M/s Friends Portfolio (P) Ltd. u/s158BC. 14.In view of the above findings, therefore, theassessment of the appellant has been made withoutsatisfying the mandatory conditions precedent for section158BD. 15.The next question addressed by the ld.Jurisdictional Tribunal in the above order was whether thenotice u/s 158BD was required to be issued within areasonable time and if it was not so issued, whether theassessment made pursuing to the notice liable to be set 12. aside on that ground. 16.The ld. Tribunal relied upon the Hon'ble GujaratHigh Court's decision in the case of Khandubhai VasanjiOesai and others Vs. DCIT & another (1999) 236 ITR 73,where it has been held that the notice should be issuedwithin 15 days from the date of computation of blockassessment in the case of the searched person or at anyrate within 60 days from that date, the sanctity behind thisperiod being the provisions of section 132(9A). 15 daysis a reasonable time to issue notice u/s 158BD of the Actto recognize the position that the AO, once he hasreached the requisite satisfaction, is bound to act swiftlyto proceed against the other persons as soon as may be. 12. aside on that ground. 16.The ld. Tribunal relied upon the Hon'ble GujaratHigh Court's decision in the case of Khandubhai VasanjiOesai and others Vs. DCIT & another (1999) 236 ITR 73,where it has been held that the notice should be issuedwithin 15 days from the date of computation of blockassessment in the case of the searched person or at anyrate within 60 days from that date, the sanctity behind thisperiod being the provisions of section 132(9A). 15 daysis a reasonable time to issue notice u/s 158BD of the Actto recognize the position that the AO, once he hasreached the requisite satisfaction, is bound to act swiftlyto proceed against the other persons as soon as may be. 17.Clearly, from the facts and circumstances of thepresent case, according to the above ruling, the conditionof issuing notice u/s 158BD within 15 days has also notbeen satisfied with. 18.Since the above two findings in the appellant's caseare sufficiently established to dispose of the appeal infavour of the appellant, it is unnecessary to deal with themerits of the block assessment order and the additionsmade therein u/s 68 or on protective basis, agitated inground No.5.” The above view has been affirmed by the Tribunal. We have heard learned counsel for the parties. 14.Learned counsel for the revenue submitted that thefinding recorded by the CIT(A) as well as the Tribunal was perverseas existence of satisfaction of the assessing officer during the blockassessment of searched person was patent and the assessee hadnexus with the material found during the search. Reference hasbeen made to the following observations in the order of blockassessment of the searched person namely M/s Friends Portfolio (P)Ltd.: “Nature of businessTrading in shares and providingaccommodation book entries.” xxxxxxxxx “All the transactions of M/s Friends Portfolio (P) Ltd. areconclusively established to be bogus on account offollowing reasons: a)Sh. Manoj Aggarwal, the Director of the company,in his statement on oath and various written submissionsfurnished during the course of assessment proceedinghas accepted these transactions to be bogus and of thenature of accommodation book entries. b)M/s Friends Portfolio (P) Ltd. became a member ofDelhi Stock Exchange Association Ltd. and got thepermission to trade from 03.3.2000. On 22.3.2000, thiscompany gave the exclusive right to trade on its tickets toM/s Abhipra Capital Ltd. situated at BM-1, Dilkhush Indl.Area, Azadpur, Delhi for a consideration of tax free deposit of Rs.2,50,000/- and monthly charges ofRs.30,000/-. The exclusive right to operate the clientaccount and the settlement account of this company wasgiven to the exclusive client M/s Abhipra Capital Ltd. Thecopy of the agreement has been seized vide pages 1 to42 of Annexure A-1 seized from BM-I, Dilkhush Indl.Area,Azadpur, Delhi.” xxxxxxxx c)Summons were issued to M/s Abhipra Capital Ltd.and various details were called for. The Director of thecompany, Sh. Pratap Gupta, categorically stated that notransactions of any other client has been done by M/sFriends Portfolio P Ltd. on the ticket of DSE upto August,2000 other than the trading done by M/s Abhipra CapitalLtd. M/s Abhipra Capital Ltd. had done the trading on theticket of M/s Friends Portfolio P Ltd. on DSE for its ownclient and bills regarding these have been issued by M/sAbhipra Capital Ltd. The cheques issued and collectedfor and by the client of M/s Abhipra Capital Ltd. havebeen done from the bank accounts of M/s Abhipra CapitalLtd. Various details to establish this fact have beenfurnished by him and the client account of M/s FriendsPortfolio P. Ltd. has been seen wherein M/s AbhipraCapital Ltd. appears as the sole client. No service taxhas been paid by M/s Friends Portfolio P Ltd. The service tax on the transactions on its ticket have been paid byM/s Abhipra Capital Ltd. tax on the transactions on its ticket have been paid byM/s Abhipra Capital Ltd. d)Enquiries were also conducted from the Delhi StockExchange Association Ltd. and the party wise, volumewise detail of transactions was obtained from them. Thetotal list of the terminals of M/s Friends Portfolio P. Ltd.have been obtained. From these details, it is observedthat all the transactions on the ticket of DSE have beendone for the clients of M/s Abhipra Capital Ltd. Infact, Sh.Manoj Aggarwal and his company M/S Friends Portfolio PLtd. did not even have a terminal to trade. The pay-in andpay-out position of each settlement period has beentaken from the settlement account and got verified fromthe DSE. It is observed that the pay-in and pay-outpositing of each settlement of M/s Friends Portfolio P Ltd.matches with the books of M/s Abhipra Capital Ltd.These facts establish beyond doubt that all the trading onthe ticket of M/s Friend Portfolio P Ltd. was done by M/sAbhipra Capital Ltd. at the Delhi Stock Exchange and noreal transactions has been done for the parties who haveprocured the bogus sales, purchase and difference billsfrom M/s Friends Portfolio (P) Ltd. e)There are various evidences in the seized materialwhich are listed below which further establish that the billsof M/s Friends Portfolio P Ltd. were fabricated and prepared to suit the requirement of the clients. Annexure A-1 seized from the office of M/s BemcoJewellers P Ltd. at 7/22, Ansari Road, Daryaganj, Delhjicontains sale, purchase and difference bills of M/sFriends Portfolio P Ltd., issued in favour of variousparties. Various discrepancies are noticed in these, billswhich clearly proves that these bills are bogus. Sh.Manoj has also accepted that these are related tobusiness of accommodation bill entries. The page wisediscrepancies are as below:- i)Page 6 is bill of Sh. Sandeep Kr. Garg on which thedate has been changed from 11.3.2000 to April2000.date has been changed from 11.3.2000 to April2000. ii)Pages 7 to 9 are bills of Shikha Jain in which thedate is 22.1.2000 which has been subsequentlychanged to June, 2000. It is note worthy that thecompany was not even registered at that point oftime.date is 22.1.2000 which has been subsequentlychanged to June, 2000. It is note worthy that thecompany was not even registered at that point oftime. iii)Page 13 is sale bill of shares of S.C.Rai dated21.3.2000. There are hand written note on thispaper like “sale bill to be prepared” 'two bills to bemade”, the total quantity of 280 shares to be splitbetween S.C.Rai 218 and Smt. Rani Rai 62.21.3.2000. There are hand written note on thispaper like “sale bill to be prepared” 'two bills to bemade”, the total quantity of 280 shares to be splitbetween S.C.Rai 218 and Smt. Rani Rai 62. iv)Pages 14 to 42 are bills of a period when M/sFriends Portfolio P Ltd. was not a member of DSE.Friends Portfolio P Ltd. was not a member of DSE. v)Page 42 is a bill of Savita Devi, the address iswritten subsequently and the mediator Bengani ismentioned.written subsequently and the mediator Bengani ismentioned. vi)Pages 45 and 48 are bills of Mamta Devi on whichaddress is written subsequently and the mediatorBengani is mentioned.address is written subsequently and the mediatorBengani is mentioned. f)Annexure A-40, A-43, A-44, A-45 & A-51 seizedfrom 5A/12, Ansari Road, Daryaganj, Delhi are sale biulls,contract note and statement of accounts of M/s J.N.Anju& Co. add. H-22 G, Saket, N. Delhi. These books havebeen accepted by Sh. Manoj Aggarwal to be used for thepurpose of accommodation entries and have been usedfor showing back dated acquisition of share for long termshare profit. Local enquiries conducted by this officehave also proved that this concern never existed at thementioned premises. vi)Pages 45 and 48 are bills of Mamta Devi on whichaddress is written subsequently and the mediatorBengani is mentioned.address is written subsequently and the mediatorBengani is mentioned. f)Annexure A-40, A-43, A-44, A-45 & A-51 seizedfrom 5A/12, Ansari Road, Daryaganj, Delhi are sale biulls,contract note and statement of accounts of M/s J.N.Anju& Co. add. H-22 G, Saket, N. Delhi. These books havebeen accepted by Sh. Manoj Aggarwal to be used for thepurpose of accommodation entries and have been usedfor showing back dated acquisition of share for long termshare profit. Local enquiries conducted by this officehave also proved that this concern never existed at thementioned premises. Some of the beneficiaries of accommodation entriesof M/s Friends Portfolio P Ltd. namely Sh. C.P.Khanna,Sh. Punit Khanna, Sh. Raghav Bahl, Sh.Rajiv Aggarwal,M/s Vulcan Electro Controls (India), M/s Target ChemicalP. Ltd. M/s Instronics Ltd., Dhanraj Singh, Harjoot Singh,Harinder Kaur, have accepted that they had takenaccommodation entries from M/s Friends Portfolio P Ltd.32.All these facts clearly establish that the transactionsof M/s Friends Portfolio P Ltd. are accommodation book entries. A total cash, clearing and transfer deposit ofRs.1,32,32,77,001/- has come in the bank accounts ofM/s Friends Portfolio P Ltd.” xxxxxxxxx “4.2.In reply thereto, the assessee has madewritten submissions on 26.8.2002 which are reproducedbelow:- “This is in reference of your above said show cause noticeour submissions are as under:- As you are aware that immediately after searchoperation on 3.8.2000 Sh. Manoj Aggarwal submitted aletter to the investigation wing of Income Tax Dept. Unit-2clarifying that he was in business of providingaccommodation entries. He provided details of thebeneficiaries to the extent known to him as well as themediators. (Their code etc.). On many occasions his statements were recordedat the Investigation Wing, Unit-2, in which he has clearlyspecified that he has not been transacting any realbusiness but he only used to issue cheques for variousbank accounts under his control against the cashreceived from the persons who used to approach himthrough various mediators. He did not know as to whattreatment they have given to such cheques in their booksof accounts. He never entered into real transactions and such transactions were on paper only. In regard to otherpersons who gave him cheques mainly showing transferof profit to his associate concerns used to take cash backfrom him as he has never done any share transactionsthrough them in fact. He has not been maintaining any books of accountsand the details were being maintained as Kachha recordswhich were used to be destroyed from time to time, out ofwhich some have been seized by the Income TaxDepartment. Annexure A-16, A-18, A-19, A-20 & A-21 of party M-5 clearly supports our above said contention. Otherseized papers with regard to reconciliation statements ofvarious mediators also clarify the above said actualposition. Your kind honour also has recorded his statementson the various occasions with regard to nature ofbusiness being done by him. In which also he hasconfirmed his earlier statements. He also provided you details of the Major concernswho have provided his bogus profit entries as well as heprovided you his full support with regard to tracing ofactual beneficiaries. As per our earlier reply vide letter dated 16.8.2002the account mentioned in your show cause notice except Annexure A-16, A-18, A-19, A-20 & A-21 of party M-5 clearly supports our above said contention. Otherseized papers with regard to reconciliation statements ofvarious mediators also clarify the above said actualposition. Your kind honour also has recorded his statementson the various occasions with regard to nature ofbusiness being done by him. In which also he hasconfirmed his earlier statements. He also provided you details of the Major concernswho have provided his bogus profit entries as well as heprovided you his full support with regard to tracing ofactual beneficiaries. As per our earlier reply vide letter dated 16.8.2002the account mentioned in your show cause notice except the account number 304, 3025, 30231814019, 30021002,101018 have been used by Manoj Aggarwal our directorfor his accommodation entry business. So far as identity,credit worthiness and genuineness of credit entries isconcerned, we have to clarify that it is not possible to giveidentity and creditworthiness of the parties who were thebeneficiaries and actually the amount has been receivedfrom various mediators as is evident from the AnnexureA-16, A-18, A-19, A-20 & A-21 of party M-5. Theseamount were first deposited in various supportingaccounts of Manoj Aggarwal and subsequentlytransferred to company's bank accounts from where thefinal cheque has been issued to the actual beneficiaries.Credit entries comprise of transfers from other supportingaccounts as well as profit cheques received from variousbeneficiaries to whom the cash was refunded back byManoj Aggarwal. Further most of these mediators of Sh.Manoj Aggarwal has also confirmed this positions. Keeping in view of the above there is nojustification for treating the credit entries in our variousbank accounts as our unexplained cash credit. It hasalso come to our knowledge that beneficiaries of Rs.80crores app. have already been traced by your kindhonour. 4.3The reply given by the assessee has been considered. It is an accepted fact that the name andaccounts of this company were used for the purpose ofproviding accommodation book entries by the Director,Sh. Manoj Aggarwal. All the transactions in the name ofthis company were only paper transactions of providingbogus accommodation entries and no real activity hasbeen done.” 15.The above shows that the assessing officer of thesearched person was fully satisfied that the transactions of sale ofshares by the assessee through searched person were bogus andrepresented undisclosed income of the assessee. 16.Learned counsel for the assessee supported theimpugned finding by relying upon the judgment of this Court dated20.7.2010 in ITA No.591 of 2009 (Commissioner of Income-Tax-I, Ludhiana Vs. Mridula, Prop. M/s Dhruv Fabrics, Ludhiana) andsubmitted that if satisfaction was not recorded during the assessmentof the searched person, block assessment could not proceed againstthe assessee. He submitted that the assessment of the searchedperson was completed on 29.8.2002 while notice in the present casewas issued on 23.9.2004 which was subsequent of the assessmentof the searched person. Order of assessment of searched persondid not specifically record the requisite satisfaction as held by the CIT(A) and the Tribunal. It was further submitted that as required underthe law, laid down in Manish Maheshwari Vs. ACIT and another(2007) 289 ITR 341 (SC), block assessment has to be referable to material found during the search. He further submitted that thenotice should be issued under Section 15BD immediately after thesatisfaction was reached while in the present case notice was issuedafter two years. material found during the search. He further submitted that thenotice should be issued under Section 15BD immediately after thesatisfaction was reached while in the present case notice was issuedafter two years. 17.After considering the rival submissions, we are satisfiedthat the questions raised on behalf of the revenue have to beanswered in its favour and against the assessee. It is patent from theorder of assessment in the case of searched person that during theassessment of the searched person, the assessing officer wassatisfied that the assessee had undisclosed income which had nexusto the material found during search. In these circumstances thejudgment of this Court in Mridula could not come to the rescue ofthe assessee as what was held therein was that requisite satisfactionmust be formed during assessment of searched person. This Courtdid not hold that law required any particular form in which the sameshould be recorded. In the present case such satisfaction havingbeen duly formed, learned counsel for the revenue rightly relies uponthe judgment of this Court in Commissioner of Income Tax Vs.Pearey Lal and sons (EP) Ltd. (2009) 308 ITR 438 (P&H) to submitthat requirement of law was met. As regards delay in issuing noticeto the assessee, we find merit in the contention that it was a casewhich involved a huge fraud of tax evasion where business of searchedperson was to give accommodation entries resulting in tax evasion to theextent of Rs.132 Crores in total, spread over the cases of various assessesin all over India. The coordination by the assessing officer of the searched person was time consuming affair. In these circumstances,delay cannot be held to be unreasonable and cannot be held tovitiate the assessment. No doubt once satisfaction is formed duringblock assessment of searched person, action must be promptly takenas submitted on behalf of the assessee and as held by the GujaratHigh Court in Khandubhai Vasanji Desai and others Vs. DCIT andanother (1999) 236 ITR 73. Whether or not action was promptdepends upon circumstances of each case. 18.The CIT(A) as well as the Tribunal are not justified inholding that no requisite satisfaction was recorded and that blockassessment proceedings are vitiated. The questions have to beanswered in favour of the revenue accordingly. On reaching thisconclusion, even though we would have quashed the impugnedorders and restored the order of the assessment officer, by way ofabundant caution, we consider it appropriate to give furtheropportunity to the assessee and for this purpose, we remand thematter to the CIT(A) for fresh decision in accordance with law. Theassessee may appear before the learned CIT (A) on 25.4.2011. 19.Both the appeals are disposed of. (Adarsh Kumar Goel) Judge February 14, 2011Pka (Ajay Kumar Mittal) Judge